Construction Inventory Management: Contractor's Guide

What is Construction Inventory Management?

Construction inventory management is monitoring the supplies needed for construction jobs. This can include tracking inventory levels for raw materials like concrete or wood, equipment such as power tools, machinery like cranes or forklift trucks, or consumables like gloves and screws.

Effectively tracking construction inventory involves optimizing procurement, storage, and distribution to ensure your construction company always has what it needs to complete its projects without running over time or budget.

Why is Construction Inventory Management Important?

Construction inventory management is important because it directly and indirectly affects all business operations. Additionally, it can reduce the chance of errors, delays, and expensive rectification.

Key benefits of efficient construction inventory management include:

• Reduced costs

• Better planning capabilities

• Improved cash flow

• More efficient operations

• Time savings

What Are The Types of Inventories For Construction Businesses?

There are three main inventory groups that contractors must manage. They are:

• Consumables

• Building materials

• Construction equipment and tools

The items within each group vary considerably but can be categorized according to a few common characteristics. 

1. Consumables

Consumables are used once and discarded or only last for a few uses before they must be replaced. Inventory managers must establish the most frequently used items to maintain sufficient stock and resupply crews without delay.

Keep in mind that consumables will vary according to work carried out on different jobs, so ensure you note the high-demand items for each type of job your business offers and check inventory levels ahead of upcoming work.

Examples of consumable items:

• Nails, screws, nuts, bolts, and other fasteners

• Hinges, handles, and brackets

• Caulk, mastic, and other sealants

• Gloves and safety vests, particularly in commercial construction

• Floor protection rolls and tarpaulins

• Cleaning supplies and rags

2. Building materials

Building materials are used within the construction project at different stages. Keeping these items in stock is often difficult unless you have a large warehouse or a high storage budget. 

Therefore, it’s important to have a robust procurement strategy to ensure the timely delivery of oversized or custom-made materials to the job site. Smaller materials like planks of wood or bags of cement may be kept in stock for faster supply as needed.

Examples of building materials:

• Rolls of wire

• Wood, cement, steel, and concrete

• Doors and windows

• Pipes

• Flooring

• Roof tiles

3. Construction equipment and tools

Equipment and tools are used on the job site to complete the project. This category has a tremendous amount of variation, including hand and power tools like screwdrivers and power drills and heavy machinery such as excavators and cement mixers.

This means procurement, storage, distribution, and transport costs can range from a few dollars to hundreds. Furthermore, heavy equipment needs regular inspection and maintenance to ensure its safety. 

It may be more cost-effective for small businesses to hire heavy machinery instead if they don’t foresee using it regularly. Remember that you will need to incorporate a procurement strategy into your inventory management if you opt to hire instead of purchasing.

Examples of equipment and tools:

• Excavators

• Cement mixers

• Asphalt pavers

• Backhoe loaders

• Boom lifts or cherry pickers

• Power drills

• Electric saws like bandsaws, circular saws, and jigsaws

• Grinders

• Jackhammers

• Screwdrivers

• Chisels

• Hammers

• Shovels

• Trowels

What Are Some Key Inventory Management Best Practices?

The items in the categories above vary widely in size and storage method, so developing an inventory storage system that works well with your warehousing space is important. 

Once this system is in place, inventory managers must monitor stock levels and coordinate distribution, transport, and restocking. To do this efficiently, keeping inventory management best practices is vital.

Here are eight important construction inventory management best practices:

1. Plan ahead

Anticipating resourcing needs for upcoming projects and ensuring you keep fast-moving materials and equipment on hand limits the likelihood of running out of crucial supplies. This helps reduce delays while materials are sourced and makes it easier to track spending and control pricing.

Use data from past projects and the details of current and upcoming projects to forecast future resources for each job site.

2. Leverage technology

While it’s possible to manually track inventory using spreadsheets, it’s time-consuming and prone to human error. Plus, managing a large, varied inventory can quickly become an onerous task requiring many hands.

Instead, opt for modern inventory management technology, like ServiceTitan’s Contractor Inventory Management software. The tool provides a centralized workflow where you can track purchases, returns, transfers, and adjustments all in one place, even across multiple locations.

3. Manage delays

Unfortunately, delays are sometimes unavoidable. When they occur, it’s important to manage them correctly to avoid a series of costly knock-on delays disrupting multiple job sites.

Look at the distribution requests and decide which are urgent. Strategically plan the flow of resources to the jobs that can’t afford to wait, then tackle the ones that can wait an additional day or two until new stock arrives or is freed up.

With ServiceTitan, you can let technicians check, reserve, and request resources to ensure they have everything they need for their next project. This allows you to better understand immediate resource requirements and manage distribution more efficiently to avoid disruptions.

4. Be consistent in how you receive stock

If each member of your warehouse team orders, receives, and packs stock differently, your inventory management system will suffer. Defining standard operating procedures (SOPs) helps to reduce mistakes, minimize stock discrepancies, and avoid duplicate purchase orders.

With ServiceTitan’s contractor inventory software, restocking is automatically triggered when stock levels reach the limit you set on a custom stock list.

You can also create inventory templates to monitor what stock should be in every truck and warehouse.

5. Track inventory item information

Keeping a record of product information allows you to better manage your inventory. It’s also helpful if any product issues arise as you can quickly find out how old the item or equipment is and where it was sourced from.

You should keep a record of suppliers, country of origin (where relevant), SKUs and lot numbers, the receiver, and the person who packed it into the truck or warehouse. For all resources that aren’t consumed during a project, you should also record who has booked it out.

The ServiceTitan Inventory app lets you track deliveries and distribution through barcode scanning. You can track quantities item by item to better control stock levels, monitor cost, and increase accountability for shrinkage, damage, and loss.

6. Take inventory locations into account

Imagine an upcoming project requires your only backhoe in a few days. You organize transportation from your warehouse to the nearby job site, only to find out the backhoe is at your other warehouse 60 miles away when transportation arrives.

ServiceTitan’s contractor inventory software lets you organize equipment and materials by location so you can see which warehouse or truck they are in. This helps you understand where your inventory is at any given time and can streamline the distribution flow and minimize delays.

7. Prioritize specific inventory items

Splitting your inventory into groups with different priority levels can make it easier to define your ideal stock levels and order frequency.

You can categorize your inventory using the following factors:

1. Low-cost, high-turnover: Cheaper items that move quickly and are in high demand. Most consumables fall into this category. Prioritize keeping a lot of inventory for these items and reordering often.

2. High-cost, low-turnover: Expensive, high-ticket items that aren’t needed frequently, such as heavy equipment that is only used at a specific point in certain projects. Generally, you will only need one or two of these items, depending on the size of your business.

3. In-between: Items that don’t fall into either category. They are moderately priced and in moderate demand. You should keep a decent amount of inventory and reorder as needed.

8. Conduct regular inventory audits

Even the best inventory management systems face challenges that result in skewed inventory reports. Therefore, it’s essential to regularly audit your inventory to stay ahead of shrinkage, damage, loss, and other inventory challenges and find where your system can improve.

Depending on the size of your business, inventory, and the frequency of projects, you can opt for weekly, monthly, or yearly inventory audits. You can also implement rolling audits on the different groups mentioned in the previous section.

Inventory should be physically counted and cross-checked to ensure it matches the levels in your inventory system.

ServiceTitan’s Inventory app with barcode-scanning capabilities enables warehouse teams to quickly and accurately count, check, and record actual stock levels, saving time and minimizing errors.

What Are The Challenges of Managing Construction Inventory?

Construction businesses face a variety of unique inventory management challenges. This is mainly due to the vast range of items needed for different jobs and the distributed nature of the workforce operating from multiple locations simultaneously.

Some key challenges to be aware of include:

• Wide range of storage needs: There’s a significant size difference between a boom lift and a box of nails, and they have vastly different storage requirements. 

Your warehouse needs to have enough space to accommodate colossal machinery and small consumables, and you should have a well-defined maintenance schedule for all heavy equipment.

This could mean you need a separate location for machinery, or you could outsource it to a plant hire company.

• Accurate tracking: With inventory ranging from cement, wood, screws, and nails to heavy machinery, office supplies, and toilet paper, it can be overwhelming to monitor the comings and goings of each item.

Implementing precise tracking, organization, and strict SOPs is vital to avoid inventory falling into chaos, especially in large businesses.

• Accountability: Wasted materials are wasted money, so while it’s inevitable that there will be some level of waste from every job, it mustn’t get out of hand. 

Site managers should be held accountable for every item they requisition for a project, to reduce excessive orders and promote reasonable use. 

Efficient inventory management also contributes to better future resource forecasting. Ensuring workers only book out the equipment and materials needed means more accurate usage data.

• Delays and disruptions in the supply chain: The varied nature of construction inventory means its supply chain is highly complicated. 

As markets are susceptible to price fluctuations and base material availability can be impeded by geopolitical events, lead times for materials—even common ones—-can be lengthy. 

Inventory managers must remain current on major global events that could disrupt their supply chain and monitor lead times for each inventory item.

• Theft: Opportunistic thieves often target construction sites as such locations are minimally attended at night and may contain expensive equipment. 

Preventing inventory loss to theft can be achieved by fencing and locking the site, but this is often impractical. Hiring security guards on high-risk sites is a good idea if you have the budget.

Implementing strict security protocols and ensuring all workers on site follow them helps reduce the theft risk. This could include not leaving any power tools on site overnight and securing all easily removable materials.

Staying ahead of these challenges will help you develop an efficient and effective inventory management system.

How Can You Choose The Best Construction Inventory Management Software?

Inventory management software is a modern solution for streamlining and improving inventory management workflows. However, it can be difficult to choose which is the right one for your business needs.

There are a few key things to look out for when choosing inventory management software, such as:

• Features: Does the tool have all the required features for monitoring inventory levels and restocking? Look for a tool with automatic restocking capabilities for your high-turnover items, location tracking, and item-by-item quantity tracking.

• Ease of use: The software you choose will be used by most members of your team, including warehouse staff and technicians. Opt for a tool that is easy to use with a minimal learning curve, to ensure smooth adoption company-wide.

• Pricing: Define your budget for inventory management and remember that software will save you time and reduce costs by limiting waste. Look for a tool that fits your budget and offers scalable pricing for when your company grows.

• Support: Fast, reliable customer support is crucial when your inventory management processes revolve around one software solution. Check out customer reviews that mention support to get an accurate perspective.

• Integrations: Integrating your inventory management system with your company's other systems allows for smoother operations across the business. 

The ServiceTitan suite of features integrates inventory management with several other vital construction company tools, including dispatching, scheduling, and front-of-house.

If you’re unsure where to start looking for inventory management software, book a demo with ServiceTitan to see what the software does first-hand.

ServiceTitan is an all-in-one contractor software solution that revolutionizes inventory management. The suite of features is tailored to home services businesses and helps contractors with business management, operations, marketing, and more. It is trusted by over 100,000 contractors across the country.